A recent report from the Insurance Information Institute (I.I.I.) highlighted the problems that the state of New York is currently facing as a result of fraud and abuse that is exploiting its no-fault auto insurance system.
According to the I.I.I., the total bill for fraudulent claims and abuse of the no-fault system in New York in 2010 was $204 million. Who footed this bill? Why, honest drivers in New York, of course, along with auto insurance companies. This $204 million created, in essence, a “fraud tax” of a whopping $1,311 per claim – or 15 percent of each no-fault claim – the I.I.I. report noted. (Related: Florida drivers could be paying “fraud tax”)
“The scale of fraud and abuse in New York State’s no-fault auto insurance system today remains at crisis levels,” Dr. Robert Hartwig, CPCU, an economist and president of I.I.I., said in a statement.
In 2010, the average no-fault claim in New York came with a price tag of $8,664, which is a significant 48 percent increase from six years earlier, in 2004, when the average cost of no-fault claims was $5,873.
How does this all affect the average driver in New York? If insurance companies are paying out more in auto claims than they should be, it is logical to theorize that drivers must be paying out more in premiums, too.
According to the I.I.I. report, New York auto insurance rates are the fourth highest in the country. Insured drivers in New York paid average premiums of $1044 in 2008, which was 32 percent higher than the national average pf $789.
Ellen Melchionni, president of the New York Insurance Association, referred to New York’s current no-fault auto insurance system as “broken.” In a statement released last week, Melchionni called for immediate reform.
“Criminals are committing rampant fraud, imposing a ‘fraud tax’ on honest, hardworking New Yorkers,” Melchionni said in the statement. “Meaningful, comprehensive reform of the laws is necessary to fix the broken system that criminals are blatantly exploiting for their personal gain.”
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